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A South Carolina company, Streit USA Armoring LLC (“Streit USA”), along with two of its executive officers and its UAE affiliates, were charged with export control violations in connection with the sale of armored vehicles to the United Arab Emirates and other countries. This is yet another instance in which law enforcement officials are using enforcement actions against individuals in their personal capacities to enforce the U.S. export laws.

According to Bureau of Industry and Security (“BIS”) charging documents, Streit USA and its two UAE affiliates transferred U.S.-origin vehicles retrofitted with ballistic steel and bullet proof glass to the UAE and other countries in at least nine instances in violation of US export laws. Violations alleged include exporting the controlled vehicles to Canada with knowledge that the vehicles would be reexported to other countries without the requisite reexport authorization, and the reexport of U.S.-origin vehicles from the UAE to other destinations without requisite reexport authorization.

What is noteworthy in the case is that the company’s Chairman and CEO Guerman Goutorov, and Vice President and Director Eric Carlson, were also charged in their individual capacities. Charges against the individuals include causing, aiding and abetting unlicensed transfers in violation of §764.2(b) of the Export Administration Regulations (Guerman) and causing, aiding and abetting a false statement to BIS in violation of §764.2(b). The individuals each had separate charging letters, Enforcement Orders, Settlement Agreements and penalties.

The parties (entities and individuals) agreed to a total of $3.5 million in penalties, of which $1.5 million was suspended subject to the respondents not committing further export violations during a three year probationary period.

This case is yet another example of officials pursuing claims against individuals as additional leverage in enforcing the export laws. Other recent cases involving persons individually charged for export violations include Timothy Gormley,[1] Peter Gromacki[2] and LeAnne Lemeister,[3] to name just a few.[4] In some instances the individuals were acting in their capacities as employees (Gormley) or officers (Goutorov and Carlson) of exporting companies, and in others they were acting alone (Gromacki).[5] In one instance the employee was a senior export compliance officer and empowered official of a major U.S. defense contractor (Lemeister). Many of the cases against individuals are criminal prosecutions with significant financial penalties and prison sentences (Timothy Gromley was sentenced to 42 months imprisonment). In tandem with this the Justice Department recently issued its widely publicized memorandum stating its intention to increase focus on the prosecution of individuals within corporations who are responsible for culpable conduct.[6]

Such cases reinforce the importance of following fundamental compliance practices in your exporting activities – these protect not just the company but the individuals involved as well. These fundamentals have been discussed previously in these articles but they bear repeating: (i) proper classification of products being exported; (ii) compliance with licensing requirements (including licensing conditions and provisos); (iii) proper agreement administration for TAA’s, MLA’s and other authorizations; (iv) adoption of an Export Compliance Program with written policies and procedures; (v) employee training; (vi) procedures for screening against prohibited parties, prohibited countries and prohibited end-uses; (vii) compliance with export recordkeeping requirements; (vii) periodic compliance audits; and (ix) taking prompt remedial action in the event of suspected violations.